China: O2O still influences ecommerce growth

Alibaba, for example, paid in August 2015 USD 4.63 billion for a 20% stake in consumer electronics chain Suning and in April 2016 invested USD 1.25 billion in Shanghai-based food-delivery business Ele.me, alizila.com reports.

“At this stage, discounts still drive industry because it hasn’t consolidated yet,” said Fang Gong, a partner at McKinsey and co-author of the report “How Savvy, Social Shoppers Are Transforming E-Commerce”, issued by  iConsumer China, the source cites.

Nevertheless, O2O is maturing. While deals are still important, consumers have begun to increase their total spend after their first engagement with these services. This is especially true in the travel, dining and transportation sectors.

The report shows that 77% of consumers boosted their outlay of cash on travel after first patronising an O2O vendor. In the dining space, that number was 65%. For transportation, dominated by taxi-hailing services, 42% of consumers spent more after their first try using O2O. In food services consumers are willing to spend more for faster delivery (52%) and better packaging (49%).

Only 35% of respondents expect lower prices from O2O transportation services, compared with 59% who expect lower prices from O2O travel services. Researchers also added that the advent of taxi-hailing apps has changed consumers` driving behavior. “Survey respondents reported that the average number of days they drive per week dropped by nearly one full day,” down to 3.26 days a week from 4.04 days, McKinsey wrote.